Reform on Sugar Policy Isn’t Getting Sweeter

The WasteWatcher

June 12, 2013 — CAGW Staff

The Senate overwhelmingly approved its version of the Farm Bill on June 10, 2012 with a vote of 66-27. There is plenty to say about what is in the $955 billion legislation—with more than $760 billion for going to food stamps and nutrition programs, and billions more going to various other programs, it seems that a discussion about what is present in the bill could last for days.

Let’s instead take a look at something that is largely not provided in the bill: reform on sugar policy. Citizens Against Government Waste (CAGW) has made repeated calls for reform on these policies, pointing out that they are outdated, harmful, and wasteful:

“An outdated relic of the 1930s, America’s current sugar scheme relies on an array of production quotas and import restrictions to guarantee a price floor for producers of cane and beet sugar. Like most price controls, the sugar program arbitrarily protects producers at the expense of taxpayers and consumers, as well as manufacturers of sugar-containing products and their workers."

Despite the efforts of CAGW and other watchdog groups, the Senate has passed a bill that not only fails to address the myriad of existing protectionist policies regarding sugar farming, which include, according to the Competitive Enterprise Institute, “unnecessary price supports, strict production and marketing controls and outdated import quotas,” it also increases subsidies for these farmers by subsidizing their crop insurance with taxpayer dollars. These policies very clearly benefit a small and concentrated group of society while costs are covered by taxpayers. As CAGW’s William Christian put it, “at a time when all Americans, not just farmers, are experiencing financial hardships in a sluggish economy, taxpayers and consumers simply cannot afford to prop up a single industry."

What is clear is that these policies are supported because of a fear of competition from sugar producers in foreign nations. However, competition is ultimately good for consumers as it increases efficiency by forcing producers to compete in order to provide the best product at the lowest price.

Those in favor of sugar subsidies most frequently cite the potential for lost jobs as justification for their position, but the claim that these jobs need saving is questionable. Jobs lost from ending protectionist policies would result from firms not serving consumers better than their competitors. Protectionism in the sugar farm industry also allows “otherwise uncompetitive Western farm products to flood international markets, at the expense of developing countries’ farmers,” as stated by Third World Network in a 2009 article.

The poor farmers in the developing world often have the comparative advantage in agriculture, but United States’ protective policies allow American farmers to get rich by keeping sugar prices “artificially high—sometimes twice the world price” according to a May 2013 National Public Radio (NPR) post. This is done at the cost of the consumers and foreign producers.

Some critics have said the latest subsidies provided for in the Senate’s newly approved bill may be even more harmful to farmers in other countries than the previous program. Economist Vince Smith even suggests that the bill “could get the U.S. in trouble with the World Trade Organization.”

The bill passed by the Senate this week adds $5 billion per year to the $7 billion already spent by the federal government to cover farmers’ premiums. Skeptics have warned, however, that implementation of this insurance program has the potential to cost far more than these estimates. Unsurprisingly, the American taxpayer again bears the cost of Washington’s misguided and destructive policies.